Centra, a startup that raised over $30 million this year through a so-called “Initial Coin Offering” promoted by celebrities including boxer Floyd Mayweather Jr., is the target of a class action lawsuit that seeks the return of investor funds. Mayweather is not named in the suit, dated Dec. 13, which alleges Centra’s founders made multiple deceptive statements and sold an unregistered security.

The suit, filed in U.S. district court in Florida, seeks repayment of the Centra investments of primary plaintiff Jacob Zowie Thomas Rensel and other investors. From July to October of this year, investors traded cryptocurrency such as Bitcoin, Ether and Litecoin for a new cryptographic token, or cryptocurrency, to be created by Centra. Centra said it planned to create a debit card that allowed cryptocurrency to be spent through established credit card networks.

Similar ICOs raised billions of dollars this year, with the organizers in most cases claiming that they were selling “utility tokens” that were not securities. A reckoning may be coming for many more such projects, but Centra’s case seems particularly egregious. The suit, which can be read in full at CoinDesk, alleges that Centra made multiple false claims, including that it had signed an agreement with Visa towards creation of its planned card. The New York Times reported in late October that Centra had no such agreement with either Visa or Mastercard.

Get Data Sheet, Fortune’s technology newsletter.

The Times also reported that Centra’s founders had no apparent experience in the highly challenging world of cryptocurrency engineering, or with the credit card business. Some had previously been accused of business fraud and financial negligence, and faced perjury charges in a drunk driving case. Other people initially listed as founders of the project were apparently fictional.

Centra claimed to the Times that Mayweather’s endorsement of their project was part of an ongoing business relationship, but a spokesman for Mayweather said his endorsement was a one-off deal, paid for in cash. During reporting of the Times piece, Mayweather deleted some social media posts promoting the project.

Mayweather is among a handful of prominent celebrities and social media personalities who have promoted Initial Coin Offerings, a practice that seems primarily aimed at buyers with little substantive understanding of cryptocurrency or blockchain technology. At the time of Centra’s crowdfunding effort, the Securities and Exchange Commission and other regulators had not clearly signaled that cryptographic tokens would be regulated as securities, but it has since begun prosecutions on that basis. That could put a lid on celebrity endorsements, since they risk running afoul of rules covering financial advice or even market manipulation.

Let’s block ads! (Why?)

Source link

Load More By elspoka
Load More In CryptoCurrency

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Check Also

Here are a bunch of free music apps and sample packs while we’re all stuck inside

Life looks very different right now as the novel coronavirus has millions around the world…